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Proposed Rules Would Mandate Electronic Payment for RRB Beneficiaries Still Receiving Paper Checks


The U.S. Department of the Treasury has announced an initiative that may make paper checks a thing of the past for U.S. Railroad Retirement Board (RRB) beneficiaries who receive them.

One part of the Treasury initiative would eliminate the majority of paper checks for federal benefit payments over the next three years. New recipients of federal benefits would receive payments electronically starting March 1, 2011. Individuals already receiving benefits as of that date would continue to receive paper checks until March 1, 2013.

Direct deposit is the most common form of electronic payment for Railroad Retirement, Social Security and veterans benefits. The RRB currently pays about 90 percent of its benefits by direct deposit, which is greater than the government average of about 85 percent.

A significant number of beneficiaries who receive paper checks do not have bank accounts. As a result, the new initiative will use Treasury's Direct Express debit card to pay these individuals. The amount of the government benefits will be loaded onto the card, which can be used like an ordinary debit card.

Currently, individuals applying for federal benefits can obtain a waiver from electronic payment by certifying that they do not have a bank account or that it would otherwise impose a hardship. Under the Treasury proposal, agencies would still be able to grant waivers, but in very limited cases. Examples include:

  • payment to individuals living in foreign countries,
  • certain disaster or military situations, and
  • non-recurring, one-time payments.

While it only costs 10.5 cents to issue an electronic payment, the government's cost to issue a paper check is $1.03. By shifting the 136 million federal benefit checks issued in a year to electronic payment, the government will save about $125 million in processing costs and more than 2 million pounds of paper.

In addition to cost considerations, electronic payment has the added benefit of providing a faster, more secure means of payment. Electronic payments are credited to the recipient's account the day the payment is due, and there is no opportunity for the payment to be lost in the mail, stolen or forged. The debit cards, which currently carry a MasterCard logo, also allow the holder to avoid paying fees for check-cashing services. The primary benefit of these cards is that recipients will be able to use them to purchase goods and services at the point of sale or obtain cash through a nationwide network of automated teller machines.

Treasury published proposed regulations to implement this initiative in the Federal Register on June 17, with comments accepted until Aug. 16. Additional information on the initiative is also available on Treasury's website, www.godirect.gov.

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